| Author |
Message |
kulman
Senior Member
Joined: 02/Sep/2006
Location: India
Online Status: Offline
Posts: 9319
|
   Posted: 07/Mar/2007 at 11:55am |
Thanks...I got your point.
I'm a bit puzzled though with following views of Warren Buffet:
Trumpeting EBITDA (earnings before interest, taxes, depreciation and amortization) is a particularly pernicious practice. Doing so implies that depreciation is not truly an expense, given that it is a “non-cash” charge. That’s nonsense. In truth, depreciation is a particularly unattractive expense because the cash outlay it represents is paid up front, before the asset acquired has delivered any benefits to the business. Imagine, if you will, that at the beginning of this year a company paid all of its employees for the next ten years of their service (in the way they would lay out cash for a fixed asset to be useful for ten years). In the following nine years, compensation would be a “non-cash” expense – a reduction of a prepaid compensation asset established this year. Would anyone care to argue that the recording of the expense in years two through ten would be simply a bookkeeping formality?
-----------------------------------
Kindly give your comments on this.
|
|
Life can only be understood backwards—but it must be lived forwards
|
 IP Logged |
|
|
|
 |
|
basant
Admin Group
Joined: 01/Jan/2006
Location: India
Online Status: Offline
Posts: 18403
|
Posted: 08/Mar/2007 at 12:52pm |
Originally posted by kulman
Thanks...I got your point.
I'm a bit puzzled though with following views of Warren Buffet:
Trumpeting EBITDA (earnings before interest, taxes, depreciation and amortization) is a particularly pernicious practice. Doing so implies that depreciation is not truly an expense, given that it is a “non-cash” charge. That’s nonsense. In truth, depreciation is a particularly unattractive expense because the cash outlay it represents is paid up front, before the asset acquired has delivered any benefits to the business. Imagine, if you will, that at the beginning of this year a company paid all of its employees for the next ten years of their service (in the way they would lay out cash for a fixed asset to be useful for ten years). In the following nine years, compensation would be a “non-cash” expense – a reduction of a prepaid compensation asset established this year. Would anyone care to argue that the recording of the expense in years two through ten would be simply a bookkeeping formality?
-----------------------------------
Kindly give your comments on this.
|
See in my previous post I indicated about companies taking loans and increasing capapcity and the markets using these tools to analyse companies where the benefits of such capex would come in 12-18 months. Now we cannot keep using this tool till eternity as Buffet proposes.
Broadly these tools are indicative only in high growth companies where the future benefits (12-18 months) is yet to be captured.
Edited by basant - 08/Mar/2007 at 12:56pm
|
|
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
|
|
IP Logged |
|
|
|
kulman
Senior Member
Joined: 02/Sep/2006
Location: India
Online Status: Offline
Posts: 9319
|
Posted: 08/Mar/2007 at 2:55pm |
|
Ok... now it is clearer.
|
|
Life can only be understood backwards—but it must be lived forwards
|
|
IP Logged |
|
|
|
mrh1312
Newbie
Joined: 30/May/2009
Online Status: Offline
Posts: 2
|
Posted: 30/May/2009 at 4:25am |
|
can you please suggest a site to obtain the various ratios, sales figures and management capability of companies..
|
|
IP Logged |
|
|
|
talk2me
Newbie
Joined: 04/Aug/2009
Online Status: Offline
Posts: 8
|
Posted: 10/Aug/2009 at 6:52pm |
|
|
|
IP Logged |
|
|
|
selvamech84
Newbie
Joined: 07/Dec/2009
Location: India
Online Status: Offline
Posts: 2
|
Posted: 07/Dec/2009 at 2:26pm |
|
Hello
could some body throw a light on how to value a power generating company?? will EV/EBITDA will do? or its only used for comparision
Edited by selvamech84 - 07/Dec/2009 at 2:27pm
|
|
IP Logged |
|
|
|
basant
Admin Group
Joined: 01/Jan/2006
Location: India
Online Status: Offline
Posts: 18403
|
Posted: 07/Dec/2009 at 3:10pm |
|
Better to go with EV per MW. Normally Rs 4 crore per MW of capacity is the norm.
|
|
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
|
|
IP Logged |
|
|
|
selvamech84
Newbie
Joined: 07/Dec/2009
Location: India
Online Status: Offline
Posts: 2
|
Posted: 07/Dec/2009 at 3:46pm |
|
Thank you very much for your reply
what you have mentioned is the total cost in developing
a thermal plant which ranges from 4-4.5 cr while hydel ranges from 5- 5.5 cr, but my concern is will the total cost incurred will be taken for valuation or the total cost/unit or you can say EV/unit will be taken where the Plant Avl factor and Plant load factor(PLF) also comes into effect..
coz..while valuing other firm we use EV/EBITDA..where it takes into efficiency of bussiness operation so in this case dont you think we should take EV/unit which they actually produce irrespective of its capacity
Regards
Selva
|
|
IP Logged |
|
|
|
Active Topics
Memberlist
Calendar
Search
Help
Register
Login
